Raw material: why it is so hard to find and the impact on prices after the pandemic
Exactly when the markets start to ignite again, virtually all raw materials have become almost unavailable and very expensive. The “everyting bubble” seems to have finally hit us and, for a transforming country like Italy, it is becoming a serious problem.
During the first months of COVID-19, companies canceled orders, waiting for the initial fright to pass and new security measures to be put into practice. In addition, with global lockdowns and paralyzations in all sectors, the extraction and production of raw materials also slowed down.
Once the acute phase of the pandemic ended, there was a rush not only to repurchase raw materials for production, but also the additional demand to replenish stocks. All this process has led to a global shortage of available raw materials and a consequent rise in prices.
For a broader overview of the current moment, it is also necessary to consider other factors: China and the United States’ fast recovery and rise in demand, the great post-pandemic economic plans, the energy transition, speculative activities and logistics issues – with the increase in shipping costs and unpredictable situations, such as the recent blockade of the Suez Canal and the new COVID outbreak which reduced the activities of the Yantian port to 30%.
The availability of aluminum
In this scenario, many Italian and European companies face difficulties to manage their procurement.
For Atim, which uses only aluminum from Italian producers, the second half of 2020 marked a constant and continuous increase in prices. The cost of aluminum has reached all-time highs since 2018 and the prices kept rising in the first quarter of 2021: + 18%, according to Finco.
It’s worth remembering that the EU produces only 25% of the primary aluminum needed for domestic demand. Thus, even though Italy is the second most important producer of the commodity in Europe, the demand from different markets and sectors is currently so high that aluminum is almost impossible to find.
What can we expect?
Last October the European Union created the Alliance for Raw Materials with the aim of making the continent self-sufficient. But it will still take years before we reach the first results of the newly established plans.
In the short term and with regard to aluminum, analysts’ opinions are divided: the less optimistic predict that its availability and the consequent increase in prices could become a structural issue if Europe doesn’t change its tax policies; the most optimistic believe that prices are destined to fall over the year due to the excess supply dictated by the Chinese production, which is growing rapidly.
Navigating this global economic Tsunami will require a great deal of dynamism and strategy, like never before. So far, in Atim we’ve been keeping our ship steady and on the right course.